Last week was another milestone in terms of escalating sovereign tensions in the Eurozone. For several days it was not clear who would lead the next Greek government. Similar uncertainty regarding the future of the Italian government triggered a severe BTP sell-off, which then led to a clearinghouse margin call for Italian debt.

But as so often in Europe, looking down the abyss led to a last-minute policy response. Greek and Italy will now both be led by national unity governments under Lucas Papademos and Mario Monti, respectively. Both governments also seem to enjoy broad support to push through urgent reforms – at least for now.

There are still many questions, including the increasing debate about the constitutional set-up of the Eurozone and a possible Treaty change in the future. Moreover, it is possible that even these new governments in Greece and Italy will struggle to push their reform agendas through. But it will take some time before we know. And until then, it is quite likely that sovereign risk premia decline – at least temporarily. Following this logic, we initiated a long EUR/$ recommendation on Friday at a level of 1.3710 for a quick bounce to our initial target of 1.40.

We also added a long RUB/HUF recommendation last week. This was partly driven by the continued upward drift in oil prices, which should boost the Ruble. At the same time, balance sheet pressures for many Eurozone banks potentially creates external funding challenges for countries in the European periphery, like Hungary, with substantial external debt roll-over needs.

Looking ahead in the upcoming week, markets will likely scrutinise the first steps of the new Greek and Italian governments. The appointment of key cabinet positions will be of relevance to establish credibility. However, it may be a bit too early for the first concrete policy steps.

Beyond politics, three themes dominate the data schedule. First, there is a raft of Q3 GDP releases in Europe (Germany, France, Eurozone, Hungary, Poland, Czech Republic). The numbers will likely still be mixed with more uniform weakness expected in the Q4 numbers. Second, we will see the beginning of the monthly survey season with the US Empire and Philly Fed releases. Finally, there is a raft of Fed speakers scheduled to talk about the economy and Fed policy.

Less thematic but also relevant are retail sales numbers in the UK and the US. Of course, we will have a look at the monthly TIC numbers to gauge the capital flow pressures for the Dollar.

Finally, as our weekly idea, we would be short $/MXN, as we think broader Dollar weakness may be more pronounced in a week where a raft of Fed speeches will likely emphasise the dovish outlook for US monetary policy. Declining fiscal risk premia in the Eurozone, combined with high cross asset correlations, could push the Dollar lower as well. At the same time, stabilising oil prices will probably boost the Mexican terms of trade. Last week’s short INR/KRW idea returned about +0.8% partly helped by the weak Indian industrial production numbers, which we had highlighted as important.

Monday 14 November

Japan GDP (Q3): Output is likely to show a notable rebound on the back of the post-earthquake rebuilding effort. Consensus expects +1.5% qoq after -0.5% qoq in Q2.

Eurozone Industrial Production (Sep): Following weak national IP numbers in a number of countries, Eurozone IP will likely drop by about -2.3% mom, according to consensus.

Polish GDP (Q3): Consensus expects a contraction of -0.7% qoq after a flat reading of 0.0% in the second quarter.

UK CPI (Oct): With the BOE still in QE easing mode and inflation running at 5% and above, it is always interesting to see if there is any sign of abating price pressures. Consensus expects a reading of +5.1% yoy after +5.2% yoy in September.

German, French, Eurozone GDP (Q3): There will be a raft of Eurozone GDP data covering the third quarter, though higher frequency data suggest that most of the recent slowing in activity data will only be reflected in the next GDP release. For Q3, consensus expects the following qoq non-annualised numbers: France +0.4%, Germany +0.5%, Euro Area +0.2%.

Fed Speeches: With the rising focus on the Fed policy options going forward, Chicago Fed President Evans’ speech on the Dual Mandate may be interesting. Evans is also scheduled to appear on CNBC, while Fed’s Bullard, Williams, and Fisher will all make public appearances.

US Retail Sales (Oct): After a strong reading last month, consensus expects some slowing to +0.3% mom after +1.1% in September. Also interesting: US Empire survey, Polish GDP.

Wednesday 16 November

Eurozone CPI (Oct): Despite the elevated readings in CPI in recent months and consensus expectations that the October number will again come in at +3.0% yoy, the focus is probably slipping away from inflation fears. With more fiscal contraction and slower growth in many Eurozone countries, inflationary pressures will likely abate over the medium term. Only a substantially higher reading than expected would change market expectations of further ECB rate cuts to 1.00%.

UK Labour Market Data (Oct): Consensus expects a slight increase in the unemployment rate to 5.2% from 5.1%. US CPI (Oct): Market expectations are for a stabilisation in core and headline inflation pressures. The expected small uptick in the year core reading to 2.1% from 2.0% yoy will likely be offset by a decline in the headline component to 3.7% from 3.9%.

US TIC Flows (Sep): More than the headline number, the composition of TIC flows will be important. With risk aversion still very high during September, we would expect more inflows into USTs, but at the same time small net outflows in all other categories.

US Industrial Production (Oct): Consensus expects a small improvement to +0.4% from +0.2% mom in September, and a small increase in capacity utilisation.

Indian Wholesale Prices (weekly): With clear signs of slowing economic activity in India but still-high inflation rates, it will be interesting to see how higher frequency indicators of India inflation evolve.

US Philly Fed Survey (Nov): With the Empire earlier this week and the Philly fed index, the monthly survey season starts again. Consensus expectations are for a stable reading of +9 from 8.7 in October.

US Jobless Claims (weekly): After better readings in recent weeks, there will be some focus on whether US activity is starting to accelerate further. Hungary GDP (Q3): Consensus expects notable slowing to +0.7% from 1.5% qoq in Q2. Industrial production will be released as well.

This whole thing is planned, so the Banksters can take over European Governments and seize all the Gold. Instead of borrowing more money, European countries should freeze the debt and pay it back in manageable chunks.

My friends, it is time for rebellion. Real rebellion. Because the tyrants have almost won.

Hey Americans, let's pay attention to your dinosaur-lobbyist-corporate-corrupted-economy-and-political-system again. High time, the more now the super-committee will be a failure. Start out with this video:

Not The Velvet Revolution. The Pleather Revolution. Looks like a real leather commodity but it is really just plastic. Won't last long. Will rip and tear in no time, and will look like hell sooner than the buyer can imagine. Does not perform well in castle-burning scenarios.

The PLEATHER revolution. (Mme. LeGarde as the SpokesRobot, though Frau Merkle does look "interesting" in German Jackboots and a pleather corset).

Market will ramp into year end, with or without much needed correction, it's "that time of the year" and the greedy bancheros couldn't care less about anything else!
The point of a peaceful resolve of "this" has long passed and outright violence, allovertheglobe, will be the only, sad, "answer" and ending of IT all!!!
Expect this "bread and circus" farce to go on until WETHEPEOPLE finally stand up! Wheneverthefuckthatwillbe!

We need to beat them at their own game. Maybe print our own currency that will be accepted by the 99%? Open a bank where the 99% chose to deposit their money? It will be a fight to get licenses and approvals because the cabal has their fingers everywhere and controls everything.

It is their "perogative" after all.

There are real ways to bleed them dry in the long run but it will take alot of resolve.

The Euro is such garbage it's pathetic. Those new PM's will do nothing, but plunder some more and ask for more handouts so they can pay for their new vacation homes. They are the scum of scum to top it off(Goldman choir boys).

Crude rose sharply as inventories are dropping worldwide and key producers show production fallling off. Production costs rose sharply for a bunch of reasons. All this resulted in backwardation. Gasoline prices in many parts of the US are at the highest levels ever for October, surpassing 2008, but demand is weak. In better times, gasoline would top $4. Biflation

Tonight while eating dinner, I watched a regional city council listening to the taxpayer's concerns. After each presented their case, the city council of 12+ stated " all issues of taxpayer's cannot be addressed by our council replies."

Some think, dumbing down of America has been completed. Not being able to foresee the future, I often wonder how these folks will survive the new world. :>)